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April 22, 2017

Fantasy Golf: A Hole in One

By: Steven Eichorn

The Masters golf tournament had quite an exciting finish this year and it also was a successful tournament for Daily Fantasy Sports (DFS) operators. As reported by Dustin Gouker: “The Masters marked the unofficial start to the daily fantasy golf season at DraftKings… the metrics for Masters contests were impressive.”

Such popularity inevitably leads to more legal scrutiny. Because golf tournaments are structured so differently from league competitions in sports like basketball and baseball, questions arise as to whether DFS golf contests stand on the same legal ground as those activities. In other words, is fantasy golf permissible under the exemption which is applied to other sports under the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA)?

UIGEA’s fantasy sports exemption requires that “winning outcomes reflect the relative knowledge and skill of the participants and must be determined predominantly by accumulated statistics in multiple real-world sporting or other events…” (emphasis added). The multiple event requirement is easily satisfied in the NFL, NHL, MLB, and NBA DFS contests because the rules require selecting teams that are playing in two different games. PGA DFS contests are slightly different because they consist of a single tournament and seemingly do not qualify for the UIGEA exemption because they are not “multiple real-world sporting events.”

Nevertheless, if the PGA DFS contest covers an entire tournament, which consists of multiple individual rounds that occur over several days, then it is likely to be considered “multiple real-world sporting or other events.” In particular, there are separate days for each round and each round is a unique, clearly defined contest that determines which players continue playing in the subsequent rounds. The amount of time and “cuts” (i.e. which players get to play in the next round) is dependent on each player’s score in the prior round and players are cut from a tournament after each round. Separating the different rounds of a PGA tournament differentiates a PGA tournament from, as an example, a contest that covered an NBA game and separated it into four quarters, which would be still be considered a single sporting event because it is a single, uninterruptedly run event and there is one score that matters (i.e. the final score is the only score that matters and the individual quarters are meaningless, except for their contribution to the final score). Therefore, PGA DFS likely is exempt under UIGEA’s exemption for fantasy sports.

It is important to realize that the above analysis is focused on whether the DFS golf contests qualify for the fantasy sports exemption in UIGEA. Irrespective of qualifying for the UIGEA exemption, the prohibitions in UIGEA are predicated on a violation of a state law. Thus, for example, the DFS golf contests would be permissible under both federal and state law in a state that permits DFS.

So, for example, let’s look at New York’s DFS statute. Section 1400(B) states: “The outcome of any Fantasy Sports Contest does not correspond to the outcome of any one Sporting Event.” The language seemingly tracks the UIGEA exemption language and requires the presence of multiple sporting events. So, the state law does not seem any more helpful to permit DFS golf.

However, the New York statute continues: “Instead, the outcome depends on how the performances of participants’ fantasy roster choices compare to the performance of others’ roster choices.” So, the New York statute is contrasting the (illegal) DFS that consists of a single sporting event with the (permitted) DFS that relies on the performance of the selected roster. Even though DFS golf may be a single sporting event, it does depend on the performance of selected rosters so it would be permitted if the second part of the statute is given more weight than the unfavorable implication from the first part of the statute.

The legality of DFS golf based on the second part of the statute is also supported by the statute’s definition of “Sports Event” as “Any amateur or professional sport or athletic event, except a Prohibited Sports Event.”- the broad definition of “Any amateur or professional sport or athletic event” lends support to the legality of DFS golf because it is included in “any sports event”. See Section 1401(170).

So, while not as ironclad as the legal basis for the other major sports, it does seem that DFS golf is on solid ground under the state statutes permitted DFS, and it likely also qualifies for the UIGEA exemption. Further, once it is permitted by state law, then it is also permitted by UIGEA because UIGEA requires the existence of a predicate state law violation.